2015 (10) TMI 375 - HC - Central Excise

Cenvat credit - Job worker availed the credit on the basis of endorsed Invoice - period April to August, 1994 - Invoices were in favor of principal manufacture - it is not in dispute that the applicant received the goods, which was duty paid. It is also not in dispute that the duty paid goods received by the appellant was processed for the ultimate manufacture of the end product and was given to the manufacturer. The only defect in the process of availing MODVAT credit was that the invoice was not marked by the original supplier in favour of the applicant as per the circular dated 12th September, 1995 but the same was endorsed by the manufacturer, namely, PCT. The particulars mentioned in the invoices are not in dispute nor its correctness on duty paid quantity, etc.is doubted. Held that - In the facts and circumstances of the case, the applicant is entitled to MODVAT credit. Prior to 1st April, 1994 gate passes were considered as valid documents under which goods were cleared by the manufacturer and also could be transferred by a dealer to a third party. Two endorsements were made permissible on the gate passes - From the aforesaid, it is clear that credit would be given on an invoice bill, which indicates payment of duty on such inputs. In the instant case, the invoice bill was produced, which evidenced payment of excise duty on the inputs received by the applicant. The said bill was endorsed by the manufacturer. The fact that the invoice did not indicate the name of the appellant was only a procedural lapse, which was rectified by the endorsement made by the manufacturer in favour of the applicant. Such endorsement made cannot make the document invalid and, consequently, we are of the opinion that endorsement made by the manufacturer in favour of the applicant on the bills raised by the supplier does not make the invoice invalid and the applicant is entitled to avail MODVAT credit. - credit allowed - Decided in favor of assessee.

Summary

Issues Involved:
1. Entitlement of MODVAT credit for job workers.
2. Validity of endorsed invoices for availing MODVAT credit.
3. Procedural vs. substantive requirements under Rule 57G of the Central Excise Rules, 1944.

Issue-wise Detailed Analysis:

1. Entitlement of MODVAT credit for job workers:
The applicant, a job worker, received raw materials from Paharpur Cooling Towers Ltd. (PCT) and claimed MODVAT credit for the duty paid on these inputs. The raw materials were received directly from suppliers, with invoices initially in the name of PCT and then endorsed to the applicant. The authorities disallowed the MODVAT credit on the grounds that endorsed invoices were not valid documents for availing MODVAT credit under Sections 57A and 57G of the Central Excise Rules, 1944. The High Court examined whether job workers like the applicant were entitled to MODVAT credit when inputs were supplied directly to them under the instructions of another manufacturer.

2. Validity of endorsed invoices for availing MODVAT credit:
The core issue was whether endorsed invoices were valid documents for taking MODVAT credit after 1st April, 1994. Initially, gate passes were accepted as valid documents under Rule 57G. However, after the issuance of Notification No.15 of 1994 dated 30th March, 1994, invoices replaced gate passes as valid documents for availing MODVAT credit. The Central Board of Excise and Customs issued a Circular No.146/57/95-CE dated 12th September, 1995, clarifying that inputs could be consigned directly to job workers, and invoices should contain the name of the manufacturer and the job worker. The High Court concluded that the endorsed invoices, which indicated payment of duty, were valid documents for taking MODVAT credit, despite the procedural lapse of not having the applicant's name on the original invoice.

3. Procedural vs. substantive requirements under Rule 57G of the Central Excise Rules, 1944:
The Court considered whether Rule 57G was mandatory or merely procedural. The applicant argued that Rule 57G was procedural and that MODVAT credit could be availed even if there was a procedural lapse, as long as the duty-paid status of the inputs was evidenced. The Court referred to previous judgments, including Commissioner of Central Excise, Allahabad Vs. Hindalco Industries Pvt. Ltd., which held that Rule 57G was procedural and did not affect substantive rights. The Court agreed with this interpretation, stating that MODVAT credit could not be denied on procedural grounds when the genuineness of the transaction and payment of duty were not in dispute.

Conclusion:
The High Court held that the applicant was entitled to MODVAT credit. The endorsed invoices were valid documents for taking MODVAT credit, and Rule 57G was deemed procedural. The procedural lapse of not having the applicant's name on the original invoice was rectified by the endorsement, and thus, the applicant's entitlement to MODVAT credit was upheld. The reference application was disposed of accordingly.